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Premises- or Network-Based: Which VoIP is Right for You?

By Tom Milligan


What little doubt existed should now be removed: VoIP is the next new thing in telephony solutions. As misconceptions erode and the underpinning technologies improve, the demand for IP-based telephony services increases. According to Forrester, three times as many enterprises are evaluating or trying VoIP this year compared with 2005. This is a sure sign that VoIP is progressing beyond �early adopter� to the mainstream.

However, with the decision to go VoIP at the premises comes change. New technology presents new hardware and infrastructure options, and VoIP is no different. Companies have to give themselves an objective once-over to decide exactly when and how they will implement VoIP.

One consideration is in the area of advanced contact handling services. These services include such features as intelligent call routing (skills-based, priority routing, or longest idle routing, for example), IVR, local or remote monitoring and recording of calls, robust real-time reports, automated surveys, and integration with an existing CRM or data management system. These are all services that can be supplied as onsite or hosted software applications.

The question is: does VoIP remain in the network or does VoIP come onsite. A company�s choice will depend on many things, such as price, available local area network (LAN) bandwidth at each location, the voice �quality of service� the company expects, and the available IP-voice technical skills existing within the company.

In the case of an onsite VoIP implementation, new equipment is required, such as an IP PBX (News - Alert) and new desktop phones. That investment brings the usual facility impacts, such as HVAC, insurance and space requirements. Additionally, the company is on the hook for annual maintenance fees, on-site technical support, and periodic technology upgrades in order to keep the operation humming. In other words, a lot of capital expenses.

For smaller companies or budget-limited departments, a hosted solution that keeps VoIP in the network, not at the premises, is more acceptable. These companies gain access to many of the quality- and productivity-enhancing customer contact features without the challenges of replacing their current hardware or impacting their LAN.

Business Benefits of Downgrading, Not Upgrading

Case in point is SCO, a Utah-based technology company that had grown through acquisitions and was consolidating operations. They had a �big� PBX and an �aging� automatic call distribution (ACD) system. Instead of moving or upgrading their equipment, they decided to go �virtual,� choosing a hosted partner to supplement a much �downsized� PBX. Now all the PBX had to do was handle onsite voice mail and voice transport for direct dial phones within the office. For the advanced, intelligent call distribution services, they went with a hosted services provider.

According to Mark Colley, SCO Director of Information Technology, the company went from a four-person telecom department, to �half a person� dedicated to that function. In terms of service fees, Colley was able to shed $4,000 per month in maintenance for the ACD and larger PBX system. Today, SCO is handling all customer support calls with fewer than 25 tech support and customer reps and 12 toll free numbers.

While a new IP PBX box can require weeks or months of training and testing, a hosted solution with advanced telephony services typically has a very fast implementation cycle measured in days. Because the applications are hosted, there is no hardware required on site and very little software, which is mostly on personal computers for accessing the remote applications. It�s a �low impact on the existing infrastructure� approach.

Gain More Control with Hosted

One of the greatest misconceptions of hosted telephony services is the idea that somehow administrators will lose control over their operations. While this may happen with some of the less technologically advanced providers, it is definitely not true for the industry leaders. In fact, depending on your vendor choice, administrators have more control than ever because they now have �quick-to-learn� interfaces for basic changes. More sophisticated changes, such as linking a toll free number to a specific routing rule, are simple to make with administrator-defined Web-based interfaces.

More advanced products give you access to a very sophisticated set of pre-integrated building blocks that an SQL database or Visual Basic programmer can learn to use in three days. These building blocks can be used to construct applications that range from the simple to the complex.

Starting Up with Top-of-the-Line Technology

Sonos is a Santa Barbara, Calif.-based developer of digital music systems. They initially needed only five agent seats, yet wanted access to sophisticated features and functions that would enable them to deliver a customer contact experience that would support their premium brand product.

Specifically, Sonos wanted a very low capital expenditure solution able to support a geographically dispersed sales and support staff. They needed intelligent call routing rules, such as being able to route based on who was calling, aligning a skill group with a priority customer group, or the ability to send a caller to the appropriate agent with longest idle time. Further, they wanted these high-end features without having to hire a full-time, in-house telephony expert.

They reviewed a carrier product, an IP PBX product and a hosted option. What they experienced proves that companies don�t have to employ 100+ agents or spend hundreds of thousands of dollars to gain access to leading edge telephony services.

During the review, Sonos learned the IP PBX box was not �smart� enough to make intelligent routing decisions to support skill levels and idle agent requirements. The IP PBX also would have required a hefty upfront capital commitment and the hiring of a $5,000/month technical manager to maintain the system onsite.

Another key feature available from some, but not all hosted providers is the ability to pay only for what you need, as you need it. Onsite equipment owners find themselves paying for excess, idle capacity during slow seasons. Such resource waste is eliminated with a highly flexible hosted solution provider that allows its clients to simply add or reduce capacity as requirements fluctuate.

The most glaring difference between in-network and onsite solutions is cost. InfoTech estimated last year that operating an onsite IP PBX can cost as much as four times what it takes to implement the same feature set with a hosted solution. These estimates include the actual purchase of the box, maintenance, and frequently required upgrades.

Where to VoIP

The question of where to locate the VoIP technology must be answered by each company based on specific needs. For small or medium-sized businesses, going with a hosted solution that keeps the VoIP technology in the network is the simplest and most affordable solution for gaining access to productivity-enhancing customer contact features and functions.

When every dollar counts, accessing network-based, VoIP applications means you�ll only pay for what you use, plus you�ll get the latest technology and functionality without having to make periodic capital outlays on upgrades.

The same benefits apply to large enterprises, perhaps even more so because of the need for multi-site connectivity and complex call routing to increase productivity and customer satisfaction. Departments within larger corporations that have had projects held up due to �misalignments� between business unit schedules and IT availability, can now present low-impact options to their decision committees, along with rapid development tools that enable IT groups to significant improve development time.

While VoIP is the next big thing in telephony, companies need to be aware of how they will deploy this technology. There are three options: VoIP-based onsite telephony equipment, hosted telephony solutions that require IP to the customer site, and hosted solutions that supplement existing, traditional phone equipment while keeping the VoIP technology in the network. Aligning your needs with the right technology option could put you in the position of saving your company a bundle. IT

Tom Milligan is vice president, inContact at UCN (News - Alert), Inc. For more information, please visit the company online at

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